Arab Today, arab today us sues 17 big banks over financialcrisis losses
Last Updated : GMT 06:21:45
Arab Today, arab today
Arab Today, arab today

US sues 17 big banks over financial-crisis losses

Arab Today, arab today

Arab Today, arab today US sues 17 big banks over financial-crisis losses

New York - AFP

US authorities on Friday sued 17 top US and foreign banks over \"billions of dollars\" in losses on mortgage-backed securities that plunged in value in the 2008 financial crisis. In court filings the Federal Housing Finance Agency alleged that in some cases the lenders committed fraud in selling nearly $190 billion in securities to mortgage giants Fannie Mae and Freddie Mac, which had to be bailed out by the government. US firms targeted in the suits included Bank of America, Goldman Sachs, Citigroup, JPMorgan Chase, Morgan Stanley, General Electric, Ally Financial and First Horizon. The foreign banks were Deutsche Bank, HSBC, Credit Suisse, Barclays, Nomura, the Royal Bank of Scotland and Societe Generale. The FHFA also sued two former mortgage giants -- Countrywide Financial and Merrill Lynch -- which are now part of Bank of America; together the face value of the mortgage backed-securities the three sold to Freddie and Fannie which were cited in the suits amounted to more than $57.5 billion. \"The suits allege violations of federal securities laws and common law in the sale of residential private-label mortgage-backed securities,\" the FHFA said in its statement. \"Certain complaints also allege state securities law violations or common law fraud,\" it added. The landmark move had been urged for years by consumer advocates, who argued that Wall Street banks have not been held responsible for actions that caused the financial crisis. The crisis was sparked when a bubble in US housing prices popped and mortgage-backed securities lost much of their value, sending shockwaves through the global banking system. The FHFA charged that the banks\' peddling of mortgage-backed securities during the bubble years eventually led to steep losses at Fannie Mae and Freddie Mac, costs that were mostly borne by taxpayers. In many cases, the FHFA said, banks issued dodgy mortgages to unqualified borrowers and then misrepresented the quality of the loans when bundling them into complex mortgage-backed securities. Mortgage lenders working for Bank of America \"systematically disregarded their respective underwriting guidelines in order to increase production and profits derived from their mortgage lending businesses,\" the FHFA said in its suit against BofA. Fannie and Freddie bought some $190 billion in mortgage-backed securities from the firms being sued, according to figures in the lawsuits. The largest amount came from the trio of Bank of America, Countrywide and Merrill Lynch. Fannie and Freddie also bought $33 billion worth of the securities from JPMorgan Chase, $30.4 billion from Royal Bank of Scotland and $14.2 billion from Deutsche Bank. In each suit, the FHFA demanded a jury trial and gave only a rough estimate for the damages it was seeking. The FHFA cited \"billions of dollars in damages\" each from Deutsche Bank, Credit Suisse, JPMorgan Chase, Royal Bank of Scotland, Countrywide and Merrill Lynch. Banks have argued that losses on mortgage-backed securities were caused by a broad economic downturn and not their own malfeasance. Fannie and Freddie \"have acknowledged that their losses in the mortgaged-backed securities market were due to the unprecedented downturn in housing prices and other economic factors, including sustained high unemployment,\" Bank of America said in a statement. The lawsuits are a \"very, very negative development\" for US banks, analyst Dick Bove of Rochdale Securities said on Bloomberg TV. \"If in fact all that cash gets taken away in these lawsuits, you are crashing the American banking system,\" Bove said. \"If you make the assumption that all these suits are going to be put in place and they\'re all going to be won, then you\'re going to wipe out the capital of the American bank industry; you will wipe out the American economy.\" -------

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Arab Today, arab today us sues 17 big banks over financialcrisis losses Arab Today, arab today us sues 17 big banks over financialcrisis losses

 



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